Correlation Between Commonwealth Bank and BHP Group

Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank and BHP Group at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Commonwealth Bank and BHP Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Commonwealth Bank of and BHP Group Limited, you can compare the effects of market volatilities on Commonwealth Bank and BHP Group and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Commonwealth Bank with a short position of BHP Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and BHP Group.

Diversification Opportunities for Commonwealth Bank and BHP Group

0.0

Correlation Coefficient

Commonwealth Bank  BHP Group

Pay attention - limited upside

The 3 months correlation between Commonwealth and BHP is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and BHP Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHP Group Limited and Commonwealth Bank is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Commonwealth Bank of are associated (or correlated) with BHP Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHP Group Limited has no effect on the direction of Commonwealth Bank i.e., Commonwealth Bank and BHP Group go up and down completely randomly.

Pair Corralation between Commonwealth Bank and BHP Group

If you would invest  3,921  in BHP Group Limited on September 2, 2024 and sell it today you would earn a total of  136.00  from holding BHP Group Limited or generate 3.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Commonwealth Bank of  vs.  BHP Group Limited

Commonwealth Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Commonwealth Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Commonwealth Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BHP Group Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BHP Group Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, BHP Group is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Commonwealth Bank and BHP Group

The main advantage of trading using opposite Commonwealth Bank and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank position performs unexpectedly, BHP Group can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in BHP Group will offset losses from the drop in BHP Group's long position.

The idea behind Commonwealth Bank of and BHP Group Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..